Correlation Between American Express and Frasers Property

Can any of the company-specific risk be diversified away by investing in both American Express and Frasers Property at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining American Express and Frasers Property into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Express and Frasers Property Limited, you can compare the effects of market volatilities on American Express and Frasers Property and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in American Express with a short position of Frasers Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Frasers Property.

Diversification Opportunities for American Express and Frasers Property

0.89

Correlation Coefficient

American Express  Frasers Property

Very poor diversification

The 3 months correlation between American and Frasers is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Frasers Property Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frasers Property and American Express is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on American Express are associated (or correlated) with Frasers Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frasers Property has no effect on the direction of American Express i.e., American Express and Frasers Property go up and down completely randomly.

Pair Corralation between American Express and Frasers Property

If you would invest  60.00  in Frasers Property Limited on January 17, 2024 and sell it today you would earn a total of  0.00  from holding Frasers Property Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

American Express  vs.  Frasers Property Limited

American Express

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

Frasers Property

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frasers Property Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Frasers Property reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Express and Frasers Property

The main advantage of trading using opposite American Express and Frasers Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Frasers Property can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Frasers Property will offset losses from the drop in Frasers Property's long position.

The idea behind American Express and Frasers Property Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.